How Much Do Employers Actually Pay For Your Health Insurance?

The United States, as has often been noted, is the only developed nation without universal health care. It's also long had higher health-related costs compared to peer nations. Insurance is a must to help shoulder those costs, and more than half of Americans get their health care through their jobs. Insurance is the number one reason many Americans hang onto jobs they otherwise can't stand.

Under the terms of the Affordable Care Act, any company with 50 or more employees must offer health insurance meeting the law's minimum standards to 95% of their employees or risk fines (i.e., $2,880 per employee, minus the first 30). Of all the benefits provided by employers, health care is the most expensive, but the cost of health care to a business will vary depending on what type of insurance offered.

With this said, a 2022 KFF survey found the average annual premiums for employer-sponsored health plans was $22,463 for family plans ($16,357 after employee contributions) and $7,911 for single plans ($6,584 after employee contributions). Employers covered 72.82% and 83.23% on average, respectively, and those figures have held into 2024.

Note that the Affordable Care Act also carries an affordability requirement. That is, the lowest premium plan offered by an employer cannot exceed a certain percentage of a worker's household income. As of 2023, that threshold was set by the IRS at 9.12%.

What employers pay in health costs

Employers providing health care to their employees have various options to do so. Sole proprietors can elect to use individual health insurance, while larger companies can use a group health plan with a fixed premium, various types of Health Reimbursement Arrangements, which allow employees to find their own health care while employers reimburse the costs, or alternative funding arrangements. Each has its pluses and minuses, and each is subject to requirements that can affect costs; Qualified Small Employer HRAs (QSEHRA), for instance, put a cap on how much a company can reimburse workers for health costs.

Keep in mind that the numbers KFF found in its 2022 survey with regard to what employers cover for their employees' health coverage were averages. Your health care-coverage experience with your employer (or if you manage a business, with your employees) can turn out wildly off from the KFF averages. It depends on the plan type chosen by a company.

Besides the structure of coverage, costs of health care to a company will fluctuate based on state laws, the industry you work in, age, and other factors. Take age: The base rate for health insurance premiums is modeled on a 21-year old. On average, a 21-year old is likely to be relatively healthy with fewer health-related expenses. But health care costs increase with age, and rates go up with it. While there is a 3:1 ratio limit on such increases, that can still make a significant difference to a company's annual premium depending on the average age of those covered under the company's offered plan.

How employers can control costs

As health care costs continue to rise in America, it might be tempting for companies to reduce their own costs by passing a greater share of the burden onto their employees, increasing the amount they have to pay into whatever insurance is offered by the company. Besides the obvious moral arguments against pushing such an arrangement, it's not advised from a business point of view either; valuable employees aren't likely to appreciate the increased cost on their end and may be more likely to leave, leaving a business with additional indirect expenses in trying to replace talent. It's similar to the real reason why employers offer 401(k) matching.

But there are other options for employers trying to control costs when it comes to covering health care for employees. Health Reimbursement Arrangements, for one, are more flexible for employers than a group health plan, because they allow a company to determine which health care costs they're prepared to reimburse, as well as allow employees to find the coverage they want. Another option? Self-funded insurance, particularly for companies with a healthy workforce, costs less and has the added benefit of letting employers keep any excess premium funds. (Speaking of worker benefits, learn what really happened to pensions.)